Tuesday, December 27, 2011

To Manage a College Budget, Perfect the Art of Genteel Poverty

College students who carefully manage their money actually live far better on far less than students who improvise from payday to payday.

Gabriel Adona, a popular professor at San Diego Mesa College, periodically reminds his students, “If you’re not suffering in college, you’re not having fun.” Adona numbers among the first, however, to agree that living frugally and suffering are by no means the same thing. Noting that students who receive financial aid generally receive more than enough money to pay their fees, buy their books, and meet their basic expenses, Adona laments that most families do not teach their children how to manage money as a crucial element in their preparation for college. “We test entering students for the English proficiency and math competence,” he says. “We ought to test them for their financial fluency, too.” Adona cites attrition statistics that indicate more than half of his students who drop-out before completing their degrees leave college “for financial reasons.” He insists, “That never should happen. Never. ”

Five fundamental rules of college budgeting

Adona and many of his colleagues advocate five unbreakable rules of college finance:

• Realistically set and strictly follow a budget.— “Realistically” and “strictly” stand-out as the most important words here. No one will survive an entire semester without going to a movie, going on a date, buying a new outfit, or splurging on some gotta-have-it item. Similarly, no one should expect to go an entire semester without some kind of emergency. Therefore, a realistic budget allows for those inevitabilities. According to Gabriel Adona, “Setting the budget seems difficult, but following it, for some students, seems almost impossible.” He stresses that the budget, written down and placed in a prominent place, implies a contract between a student and his or her conscience. “No excuses. No explanations,” he says in his “teacher voice.”

• Always spend less than you earn, and don’t spend money you don’t have.— “Of all the debt college students accrue, credit card debt is the worst,” Adona emphasizes. “The campus tries to restrict credit card companies’ access to heavy traffic areas, but that does not stop them from soliciting business from naïve freshmen and sophomores.” He has stories of students hitting their limits in just a few days and then living to pay them off for years. Because he believes in strict enforcement of the “don’t spend what you don’t have” clause, Adona says flatly, “Just do not get a credit card. Not any kind. Not for any reason.”

• Perfect the art of genteel poverty.— Adona admits this is a very polite way of saying, if a student qualifies for public assistance and special discount programs, he or she should use them. Most students live well below the federal standard for poverty, so that they qualify for food stamps, and they may qualify for federally subsidized housing. If they meet the poverty criteria, then they also qualify for reduced utility rates, and they can take advantage of community food banks. Naturally, they qualify for student discounts wherever they go, and they never should hesitate to ask if local merchants give student discounts. Adona, however, goes a step further, advocating, “Sell your car. You don’t need it.” And he stresses, “Live with roommates who are just as frugal as you are, so that you never feel tempted to splurge.”

• Speed-up completion of your degree.— At public colleges and universities, the average time of completion for a Bachelor’s Degree hovers around 6.2 years. Some of the problem originates in serious state budget cuts, but most of it derives from students’ strict compliance with the old fashioned academic calendar. “Students easily can finish a four-year degree in three years when they take classes online and attend summer school and ‘winter session’,” Adona asserts. On average, an accelerated degree plan will save a state college student more than $20,000.

• Skip spring break.— A trip to any popular spring break destination costs approximately $3000. For California and Arizona college students, those $3000 would almost cover two semesters’ instructional fees. For any college student, those $3000 would cover a whole lot of routine expenses. If a student stays home and works during spring break, even if he or she works for minimum wage, the net change comes to plus $3330.00.

The average 2012 college graduate will accept a diploma and begin a life devoted to retiring approximately $100,000 in student loans. Although graduates accept the debt load as the reasonable price of a prestigious degree, nearly 90% of them express regret they did not manage their money more skillfully. When you live frugally in college, you speed-up your prospects for owning a nice home with a luxury sedan on the driveway.

Peter Harrington is a career counselor and content contributor for Top Online Colleges, a great source for tons of information on expanding your education, from top business degrees to Nursing colleges.